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Exam 18: Cost-Volume-Profit

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Question 71

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Gordon Manufacturing earned net income of $100,000 during 2015. The company wants to earn net income of $40,000 more during 2016. The company's fixed costs are expected to be $147,000, and variable costs are expected to be 30% of sales. Instructions (a) Determine the required sales to meet the target net income during 2016. (b) Fill in the dollar amounts for the summary income statement for 2016 below, based on your answer to part (a).

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(a) 70%X - $147,000 ...

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Question 72

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Which of the following is not an underlying assumption of CVP analysis?

A) Changes in activity are the only factors that affect costs.
B) Cost classifications are reasonably accurate.
C) Beginning inventory is larger than ending inventory.
D) Sales mix is constant.

E) C) and D)
F) A) and D)

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Question 73

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In applying the high-low method, what is the fixed cost?

An activity index identifies the activity that has a causal relationship with a particular cost.

Ferris, Inc. has a unit selling price of $500, variable cost per unit of $300, and fixed costs of $260,000. Instructions Compute the break-even point in units and in sales dollars.

In CVP analysis, the term "cost" includes manufacturing costs, and selling and administrative expenses.

For an activity base to be useful in cost behavior analysis,

Cost activity indexes might help classify costs as

The contribution margin ratio of 40% means that 60 cents of each sales dollar is available to cover fixed costs and to produce a profit.

Norton, Inc. has the following information available for September 2016. Instructions (a) Prepare a CVP income statement that shows both total and per unit amounts. (b) Compute Norton's breakeven in units.

Weatherspoon Company has a product with a selling price per unit of $200, the unit variable cost is $110, and the total monthly fixed costs are $300,000. How much is Weatherspoon's contribution margin ratio?

CVP analysis is not important in

The contribution margin ratio is calculated by multiplying the unit contribution margin by the unit sales price.

Reliable Manufacturing wants to sell a sufficient quantity of products to earn a profit of $100,000. If the unit sales price is $10, unit variable cost is $8, and total fixed costs are $200,000, how many units must be sold to earn income of $100,000?

In 2015, Stallman Co. had a break-even point of $800,000 based on a selling price of $10 per unit and fixed costs of $200,000. In 2016, the selling price and variable costs per unit did not change, but the break-even point increased to $840,000. Instructions (a) Compute the variable cost per unit and the contribution margin ratio for 2015. (b) Using the contribution margin ratio, compute the increase in fixed costs for 2016.

A mixed cost contains

The difference between the costs at the high and low levels of activity represents the fixed cost element of a mixed cost.

Kaplan, Inc. produces flash drives for computers, which it sells for $27 each. The variable cost to make each flash drive is $13. During April, 700 drives were sold. Fixed costs for April were $2 per unit for a total of $1,400 for the month. How much is the monthly break-even level of sales in dollars for Kaplan?

Armstrong Industries has a contribution margin of $240,000 and a contribution margin ratio of 30%. How much are total variable costs?

Cunningham Industries reported actual sales of $2,000,000, and fixed costs of $540,000. The contribution margin ratio is 30%. Instructions Compute the margin of safety in dollars and the margin of safety ratio.